Government endorses new measures to encourage growth and reduce deficit

The Spanish cabinet approved, on 3 December 2010, a law that brings together a set of measures aimed at encouraging investment and employment and reducing the public deficit. The law was announced alongside a decision not to renew the extension of a €426 payment for those no longer entitled to unemployment benefit. The cabinet also approved a draft law regularising private employment agencies, which was finally enacted on 31 December 2010.

Measures to encourage business activity, investment and employment

After a week marked by tension due to the increase in the public debt, the government approved a Royal Decree Law on fiscal, labour and business deregulation that aims to foster the creation of employment and investment and increase public revenue. Some of the measures announced are reflected in the sustainable economy bill approved in November 2009 (ES0912039I) while others have sidestepped public debate.

The measures that have been approved are described below.

Tax and economic liberalisation measures

Cut in corporation tax

Corporation tax will be reduced in two ways. First, the concept of the ‘reduced-size enterprise’ (businesses with sales figures of up to €8 million) has been extended to those with sales figures of up to €10 million. This means more enterprises will be subject to a tax rate of 25% rather than 30%. Second, the amount to which the reduced tax rate is applied has been increased to cover profits of €300,000, up from €120,000.

Elimination of payment of Chamber of Commerce fees

This fee will now be voluntary. However, in order to allow the chambers to make necessary adjustments, 2011 will be a transition period for companies that are not considered ‘reduced-sized’, as the 2011 fee will be paid according to profits made in 2010.

Streamlining procedures for establishing companies

It will now be possible to set up a company within five days and the administration involved in creating new enterprises has been reduced.

Measures concerning employment policies

There will be an increase in the number of advisers offering a personalised service to unemployed jobseekers. This means promoters taken on temporarily in 2008 will have their contracts extended until 2012, and a further 1,500 promoters will be recruited.

Measures to reduce deficit and increase public revenue

Newly recruited civil servants will be integrated into the general social security regime. Civil servants entering public administration from 1 January 2011 will no longer benefit from a special social security regime, which offers greater advantages. This measure will increase the number of contributors to a single tax and pension distribution system.

The law also provides for the privatisation of airport management and the national state lotteries company. AENA, the publicly owned enterprise in charge of airport management, will become a public-capital enterprise that will be able to accept private capital investment. A National Company of State Lotteries and Bookmaking has been created, the shares of which can be acquired by private investors.

Duties on sales of tobacco have been increased.

Elimination of the extension of €426 benefit for unemployed

The elimination of this extension, announced in parliament along with the other measures described above, has not been included in the decree law. According to Spanish Economy Minister Elena Salgado, the decree establishing this benefit already determined its temporary nature (ES0909029I), so in order to eliminate this payment, the government only needs to abstain from renewing it.

The payment given to unemployed persons had been renewed twice up until now, affecting some 700,000 unemployed people who were no longer entitled to unemployment benefit. By not renewing the payment, the government has failed to fulfil its commitment to maintain it as long as the rate of unemployment exceeded 17%.

According to calculations made by the General Workers’ Confederation (UGT), bearing in mind the average monthly increase in the number of those whose unemployment benefit runs out, this measure could make another 500,000 workers vulnerable between February and December 2011. The government has not provided any official estimates of the numbers likely to be affected.

Regularisation of private placement agencies

The regularisation of private placement agencies, announced together with the other measures, was finally approved on 30 December, with the Royal Decree 1796/2010.

According to the decree, placement agencies are defined as public or private organisations, whether profit-making or non-profit-making, which collaborate with the public employment service to carry out labour mediation activities or activities related to jobseeking, such as personal guidance and information or recruitment. Profit-making agencies that act as collaborating organisations may claim up to 60% of their financing from funds aimed at public employment services. In the case of non-profit-making agencies, this percentage rises to 90%.

The decree establishes that placement agencies must fulfil the following obligations:

• prior authorisation for their activities must be granted by the public employment service;

• authorisation must be sought in order to extend their sphere of activity;

• any services provided to workers must be free of cost;

• equality and non-discrimination principles must be guaranteed in access to employment;

• the privacy and dignity of confidential information must be respected and protected;

• an activity subject to authorisation must not be subcontracted to a third party;

• specific schemes must be drawn up and adopted for the placement of unemployed people who belong to priority groups, as specified in Law 56/2003 of 16 December (young people, women, long-term unemployed persons over the age of 45 years, disabled individuals and immigrants);

• computer systems must be compatible with and complementary to the public employment service’s information system in order to facilitate access to information.

It is also worth noting that the decree intends to introduce a set of efficiency indicators, which will be reviewed on a two-yearly basis, with a view to working towards potential collaboration agreements between agencies and public employment services. Some of the aspects that these indicators will need to consider are the number of people using the services, the number of people using services who draw unemployment benefit, the number of people using services who belong to targeted groups, the number of job offers and positions gained, the number of signed contracts and the number of signed indefinite contracts.

Assessment of the social partners

The trade unions have taken a highly critical view of these measures. UGT considers the elimination of the €426 payment ‘a tremendously unjust and incomprehensible measure that punishes those suffering greater hardship’ and claims in a press release (in Spanish) that the other measures are in keeping with the change in direction taken by the socialist government as a result of the pressure exerted by the financial markets and international institutions.

The Trade Union Confederation of Workers’ Commissions (CCOO) issued a statement (in Spanish) strongly condemning the partial privatisation of AENA and the lotteries agency. It says they are profitable enterprises which, if sold, may bring a considerable loss of future revenue.

As far as the employer organisations are concerned, the Spanish Confederation of Employers’ Organisations (CEOE) and the Spanish Confederation of Small and Medium-Sized Enterprises (CEPYME) have expressed, in a joint statement (in Spanish), a positive assessment, endorsing three specific measures: the corporation tax reform, the regulation of private placement agencies and the resumption of the privatisation process of public enterprises.

Pablo Sanz De Miguel, CIREM Foundation